IZA DP No. 6857 In-State Tuition for Undocumented Immigrants and its Impact on College Enrollment, Tuition Costs, Student Financial Aid, and Indebtedness Catalina Amuedo-Dorantes Chad Sparber September 2012 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor In-State Tuition for Undocumented Immigrants and its Impact on College Enrollment, Tuition Costs, Student Financial Aid, and Indebtedness Catalina Amuedo-Dorantes San Diego State University and IZA Chad Sparber Colgate University Discussion Paper No. 6857 September 2012 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 E-mail: [email protected] Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. 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IZA Discussion Paper No. 6857 September 2012 ABSTRACT In-State Tuition for Undocumented Immigrants and its Impact on College Enrollment, Tuition Costs, Student Financial Aid, and Indebtedness* The 1996 Immigration Reform and Responsibility Act barred states from giving unlawful residents postsecondary education benefits that states do not offer to U.S. citizens. In contrast to this federal law, several states have passed legislation explicitly allowing undocumented immigrants to pay in-state tuition rates. We use a difference-in-difference estimation methodology to assess intended and unintended consequences of this tuition policy. First, we find evidence consistent with past studies that postsecondary enrollment rates of Hispanic non-citizens have increased in treatment states relative to control states without negatively impacting the enrollment rates of native-born Americans. Second, state policies benefiting undocumented immigrants have not increased tuition and fees at comprehensive and community colleges attended by the vast majority of students, though rates have risen at flagship universities. Finally, despite some weak association with increased indebtedness among Hispanic natives, resident tuition subsidies for undocumented immigrants do not appear to have reduced financial aid or increased indebtedness for other demographic groups. JEL Classification: F22, J15, I23, I28 Keywords: immigration, college tuition, DREAM Act Corresponding author: Catalina Amuedo-Dorantes Department of Economics San Diego State University 5500 Campanile Drive San Diego, CA 92182 USA E-mail: [email protected] * The authors thank Ethan Lewis and Phani Wunnava for helpful comments and suggestions. 1. Introduction The Deferred Action for Childhood Arrivals (DACA) executive order signed by President Obama on June 15, 2012, which grants two-year deportation deferrals and work permits to unauthorized immigrants brought to the United States as children, has reinvigorated the contentious debate over policies pertaining to undocumented immigrant youth. An important aspect of this debate left unaddressed by the program is the state-level variability in policy regarding postsecondary tuition rates charged to undocumented immigrants. The Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 effectively prohibits unauthorized immigrants from paying in-state (or resident) tuition rates for tertiary education by barring states from giving undocumented residents postsecondary education benefits that they do not offer to all U.S. citizens. Despite those IIRIRA regulations, however, thirteen states between 2001 and 2011 enacted legislation allowing undocumented students to pay resident tuition rates at public colleges and universities. We perform difference-in-difference estimation exploiting cross-state variation to examine some of the intended and unintended effects of this policy. Our analysis begins by assessing whether policy granting resident tuition for undocumented immigrants (hereinafter, “policy”) has affected college enrollment rates. This issue has been explored by Kaushal (2008) and Chin and Juhn (2010), but those studies arrive at opposing conclusions with the former arguing that likely-illegal immigrants experience large enrollment gains and the latter finding no effect. Our results are consistent with those of Kaushal (2008). Likely-undocumented college-aged individuals are 3 to 6 percentage points more likely to enroll in college when they reside in states offering in-state tuition to undocumented immigrants. Additionally, we find no evidence of resident tuition subsidies for undocumented immigrants crowding-out other students from enrolling in college. In fact, Hispanic natives have also experienced enrollment gains, perhaps suggesting a cohort effect. 1 Next, we examine the potential for unintended consequences previously unexplored by the literature. We first investigate whether resident tuition subsidies for undocumented immigrants have caused states and public institutions to compensate for lost revenues by charging higher tuition and fees. We find that the granting of resident tuition rates to undocumented immigrants is associated with increased tuition and fees for both resident and nonresident students at flagship universities. However, prices at comprehensive colleges are unaffected, while community colleges experience small declines in resident tuition rates. Given that about 50 percent of public school enrollees attend community colleges and only 7.4 percent attend flagship institutions, we can conclude that the majority of students have not experienced a direct increase in tuition cost. Note, however, that college tuition and fees represent advertised state-level “sticker- prices” that might not reflect the actual costs of college paid by individual students if they receive grants and other forms of financial aid. In addition to higher tuition and fees, another potential unintended consequence of the policy at hand could be a reduction in aid provided by states and schools in order to capture lost funds. Alternatively, the increased enrollment of undocumented immigrants could have a reallocation effect, pushing other student groups toward more expensive schools offering less aid and, as a result, raising indebtedness levels. To test these predictions, we assess the effect of policy granting resident tuition subsidies for undocumented immigrants on the aid and indebtedness of college enrollees. We find that such a policy is marginally associated with increased indebtedness only for Hispanic natives – a group that also experiences increased enrollment from policy. Grants and aid rise for Hispanic non-citizens, but not for other demographic groups. We caution, however, that results from this analysis could be encumbered by selection biases if the policy simultaneously alters the type of individual who enrolls in college. 2 Nonetheless, the collective evidence in this paper endorses the long-run effectiveness of in-state tuition subsidies in raising college enrollment rates among eligible undocumented immigrants without imposing large negative effects on the majority of college students. 2. Undocumented Youth and Postsecondary Education Using data from the March 2010 Current Population Survey (CPS) and a residual method technique, Passel and Cohn (2011) estimate that 11.2 million unauthorized immigrants live in the United States, accounting for 3.7 percent of the population. Unauthorized workers represent 5.2 percent of the labor force. Children of undocumented immigrants comprise a much larger 8 percent share of the newborn population. Eighty-two percent of the 5.5 million children born to unauthorized immigrants are American citizens by birth. The remaining 18 percent – approximately 1 million children – are residing in the U.S. illegally. The Supreme Court’s 1982 Plyler versus Doe decision ruled that undocumented immigrant children have a legal right to attend public school. Tertiary education policy is less clear. Federal-level legislation (IIRIRA) effectively prohibits undocumented immigrants from paying resident tuition rates – a law affecting an estimated 50,000-65,000 unauthorized immigrant students annually.1 In seeming opposition to federal law, thirteen states have passed legislation that permits resident tuition rates for undocumented college and university students who have met specific criteria. Though the requirements vary from state to state, qualified students usually need to have 1) lived in the state and attended high-school for a particular time period, 2) obtained a high-school diploma or equivalent